Staged implementation of inclusionary zoning as a mechanism to improve housing affordability in Auckland, New Zealand

Abstract

Purpose The purpose of this paper is to analyse how the staged implementation of inclusionary zoning (IZ) performs relative to conventional IZ programmes in terms of increasing the number of low- and moderate-income households become homeowners. Design/methodology/approach The paper applies a matching model implemented through a mixed-integer programme model taking Auckland (New Zealand) housing market as a case study. The IZ is simulated by two features: a target price (below which affordable houses are defined) and the income threshold (below which any household gains access to the programme). The staging of IZ consists of first directing affordable houses to low-income households, where those houses that are not sold are cascaded to subsequent population groups with higher incomes. Findings The staged implementation of IZ does not necessarily imply that the number of sales will increase both for affordable and market-rate houses. However, a hybrid approach defined by two target prices results in a greater number of sales relative to a conventional IZ and a baseline affordable market while achieving market efficiency and equity. Research limitations/implications The paper is limited to the marginal impact of new affordable houses entering the market. It does not address further market rounds for houses left empty for tractability purposes. Also, the analysis is circumscribed to current renters and not owners, if owners were included they would outbid renters and distort the intended impact of IZ as an affordable housing policy. Originality/value The paper has relevance for policymakers because it provides evidence about the dimensions of IZ to have a lasting effect on housing affordability. The model is applied to a single housing market but is suitable to be generalized and adapted to a different urban environment.

Sorting (and costing) the way out of the housing affordability crisis in Auckland, New Zealand

“…From each intersection those households with the seven highest incomes are selected and are assumed as those with the greatest likelihood to buy a dwelling (strongest preferences and highest incomes), resulting in 13,632 households. This figure is higher than Fernandez and Martin (2021) and Fernandez and Martin (2020) (about 9,000 households). Improvements in the code allow better and more efficient use of memory while keeping tractability.…”

“…To model relocation alternatives, 12 submarkets are constructed based on Gaussian mixture (GMM) clustering and sales data for transactions between 2011 and 2019 (Figure 3). The two main differences relative to Fernandez and Martin (2021) and Fernandez and Martin (2020) are as follows:…”

Affordable housing policies in a post-COVID aftermath

“…We use a one-to-one matching model that simulates market behaviour of current renters bidding for new houses entering the market. We use a variation of the model used in Fernandez (2019a), Fernandez et al (2020) and Fernandez and Martin (2020). The outcome of the model is a representation of a competitive equilibrium where developers remain profitable and therefore willing and able to supply houses.…”

“…Given that affordability policies will be needed going forward, despite the pandemic (Layser et al , 2020), it is necessary to know which policies can be effective and have an idea of how much affordable housing can be delivered. The purpose of this paper is to assess the outcomes of a suite of affordability policies: the targeting of affordable houses to specific population groups (to mimic a type of inclusionary zoning -IZ), a shared ownership scheme (SO), and the cascading (or release) of the developed affordable houses into the broader market after an initial “embargo” period when they can be sold only to the target groups (Clapham, 2018; Fernandez and Martin, 2020). This paper then explores the design features of those policies to identify policy packages that increase the number of low or moderate-income households becoming homeowners.…”

Assessing Land-use Suitability of Existing Inclusionary Zoning Projects in the Australian Capital Territory

“…To date, there are more than 500 jurisdictions across 28 states in the US that implemented IZ policies (Sturtevant 2016). Following this lead, a wide range of countries including Australia, Canada, and New Zealand have adopted the IZ strategy to a varied extend (Mah 2009;Gurran et al 2018;Fernandez & Martin 2020). Table 1 is a summary of research findings that relevant to IZ policies.…”